Govt to pay off Rs.25,000 crores to banks by way of loan waiver

Published: Wednesday, August 27, 2008, 19:33 [IST]

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New Delhi, Aug 27 (UNI) Finance Secretary Arun Ramanathan today said the government will compensate Public Sector Banks by as much as Rs 25,000 crore to help them with the amount they have paid to farmers by way of loan waiver.

The amount will be released to the lending institutions against the debt waiver when Parliament meets in October and approves the supplementary demands for grants, Mr Ramanathan told news persons while briefing them about Finance Minister P Chidambaram's review meeting with the Regional Rural Banks (RRBs), Mr Ramanathana, however, said the government has yet to take a decision on the suggestion by the Banks that payment be made towards interest from March 1.

About Mr Chidambaram's address to the RRBs, Mr Ramanathan said he advised on the urgency of accelerating the computerisation of their branches.

Mr Chidambaram also spoke about the need for better training to the employees.

Mr Ramanathan said the Finance Minister expressed satisfaction with the performance of the RRBs.

He said the number of RRBs would come down to 83 from the existing level of 88 after 12 RRBs are merged and their number brought down to five.

Sources said Public Sector Banks asked the government to pay interest for delay in reimbursing the Rs 70,000 crore worth farm loans written off by them.

RRBs, which basically cater to the rural sector, are either sponsored by major Public Sector Banks, the Centre or State governments.

The bankers told Mr Chidambaram that they were facing liquidity crunch due to delay in payment to them by way of the farmers relief package. This created difficulties in providing credit to farmers.

Mr Chidambaram told them that due to delay in Parliament session, Supplementary Demand of grants could not be passed.

Sources said the RBI and NABARD have been asked to look into this matter so that Banks do not face fund shortage for advancing loans to the farmers.

The bankers were concerned that though the farm loans have been written-off as on March 31, 2008, they have still to get reimbursement of funds from the government.

The Parliament session being deferred till October 17, the government would be unable to release funds before October-end.